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Runaway Medical Inflation

10/26/2016
By Charles Payne, CEO & Principal Analyst

It remains to be seen if this is the big political October surprise. It is for sure the inevitable healthcare conundrum - Obamacare premiums surge.  Ironically, when the plan was cobbled together, the number crunchers at the Congressional Budget Office (CBO) saw this coming.

2017 Unsubsidized Obama Care Premiums
Silver Plan 

CBO 2010 Estimate

$5,538

Actual

$5,586

The reality is that premiums were held back the last couple of years because insurance companies could no longer count on the government to back bills above $60,000 to $250,000.  Essentially, insurance for insurance companies is gone; and now, 21% of the nation is left with only a single choice while hundreds of towns have no options. 

The biggest sticker shock includes a couple of so-called swing states:

  • Arizona 116%
  • Oklahoma 69%
  • Tennessee 63%
  • Minnesota 59%

Proponents of Obamacare are quick to point out that 85% of users qualify for subsidies and there are other plans available with less care:

  • $75 month 72%  (qualify)
  • $100 month 77% (qualify)

Employer-provided plans will edge above $18,000 from $13,770 in 2010. While this might keep premiums in check for many at the end of the day, these plans must be paid for. That means  businesses, especially smaller businesses with fewer employees or investments in growth. The reality is that our medical care system is broken and in need of greater competition, limited legal verdicts, and frivolous lawsuits.  I would suggest drug companies get longer exclusivity periods after spending billions on new drug developments.

Runaway Medical Inflation

September Inflation
Medical Component

 

Change Y/Y

Hospitals

6.0%

Commodities (drugs)

5.2%

Physicians

4.8%

US CPI

1.5%

Note: The only segment of inflation rising faster than medical care is motor vehicle insurance, and I blame that on texting.

This is a major political issue made more critical because of broken promises. In fact, finding the sweet spot is going to be difficult, particularly because pre-existing conditions are expensive. Allowing young adults to stay on parents’ plans removes the healthiest folks whose premium payments might have helped offset the cost of older patients. 

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Charles Payne
Wall Street Strategies


 

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